Question 1 of 2 A single-step income statement: Is not permitted when financial statements are prepared in accordance with generally accepted accounting principles. Reports the same amount of net income as that reported on a multiple-step income statement. Reports revenues and expenses, but not gains and losses. Always includes a gross profit subtotal. Never includes selling expenses.

Is not permitted when financial statements are prepared in accordance with generally accepted accounting principles.

Explanation:

A single step income statement is a financial statement format that lists all expenses including cost of good sold as a total.  In other words, the single step income statement presentation doesn't break expenses into categories like cost of goods sold, operating, non-operating, and others.

Instead, a single-step income statement presents the revenue, expenses and the profit or loss generated by a business, but it reports on this information by using just one equation to calculate profits. The equation used in a single-step income statement is: Net Income = (Revenues + Gains) – (Expenses + Losses) .

One important criticism of the single step income statement is that gross profit and income from operations are not readily available for analysis.   This is why it not permitted under GAAP.

A single-step income statement gives a simple accounting of a business's net income, whereas a multi-step income statement follows a three-step process to calculate net income, separating operational from non-operational revenues and expenses.

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